by 2012sprint

“What a tangled web we weave, When at first we practice to deceive”

Do you think this has anything to do with this? 🙂 How Henry Paulson Tipped Off Hedge Funds of Fannie Mae Rescue

Could he also be tied to this?

Yahoo-

The Treasury Department is investigating a report that Freddie Mac, the mortgage giant, bet against homeowners’ ability to refinance their loans even as it was making it more difficult for them to do so, Jay Carney, a White House spokesman, said on Monday.

The report came just as the Obama administration had been escalating its efforts to push Fannie Mae and Freddie Mac to ease conditions for homeowners, including those who owe more on their mortgages than their homes are worth.

Last Friday, the Treasury announced that it would offer increased incentives to lenders to forgive portions of homeowner debt, saying pointedly that for the first time the incentives would be offered on loans held by Fannie and Freddie.

[YAHOO]

I’m sure this is only a “tip” of this iceberg!

Around the conference room table were a dozen or so hedge- fund managers and other Wall Street executives — at least five of them alumni of Goldman Sachs Group Inc., of which Paulson was chief executive officer and chairman from 1999 to 2006. In addition to Eton Park founder Eric Mindich, they included such boldface names as Lone Pine Capital LLC founder Stephen Mandel, Dinakar Singh of TPG-Axon Capital Management LP and Daniel Och of Och-Ziff Capital Management Group LLC.

Business Week-

Treasury Secretary Henry Paulson stepped off the elevator into the Third Avenue offices of hedge fund Eton Park Capital Management LP in Manhattan. It was July 21, 2008, and market fears were mounting. Four months earlier, Bear Stearns Cos. had sold itself for just $10 a share to JPMorgan Chase & Co.

Now, amid tumbling home prices and near-record foreclosures, attention was focused on a new source of contagion: Fannie Mae and Freddie Mac, which together had more than $5 trillion in mortgage-backed securities and other debt outstanding.

[BUSINESS WEEK]

#WikiLeaks- PAULSON DISCUSSES FINANCIAL MARKETS, IRAN WITH SARKOZY, LAGARDE

Alexander Higgins-

In 2007 top US and France officials knew rampant fraud being committed by regulators, rating agencies and Wall Street Banks would soon cause a global financial collapse.

While investors and nations around the world were happily giving trillions of dollars away to crooked Wall Street bankers top officials in the United States and France knew the market would soon collapse and people would be robbed of millions.

While raising the issue that the role of government regulators and rating agencies needed to be reviewed in the wake of the upcoming crisis, US officials ignored calls from the French government to enact necessary regulation to stop the rampant fraud that would soon result in investors losing tens of trillions of dollars they had invested into the markets.

The cable reveals that while discussing the ability of the French banks to survive the crisis, French President Sarkozy was pushing the US to enact regulations to forestall the crisis. Instead, Henry Paulson responded by telling Sarkozy not to overreacted because the” it would take months, not weeks, for credit to be re-priced” telling France this is “not a major crisis.”

Paulson went on to warn that the major problem was with the German banks and which would require a bailout from the taxpayer while warning that the assets held by banks but covered up from investors by being held off-balance sheet presented systematic risk to banks and to sovereign wealth.

The cable clearly reveals that taxpayer bailouts would be needed.  Paulson further up sticks up for the Wall Street hedge fund saying they were not to blame for the crisis while acknowledging there were major Wall Street transparency issues.

To summarize, the cable reveals that top government officials in France and the US knew Wall street banks were committing fraud in the origination and packaging of sub-prime mortgage and lying to investors about the resulting securities they were creating and selling. Officials knew banks were also lying about their own liabilities and hiding them from investors by keeping the assets off their balance sheets.  The government also knew that both regulators and ratings agencies were participating in the scheme.

Remember as you read this cable, these conversations all took place over a year before the 2008 financial collapse when taxpayers around the world were forced into giving up trillions of dollars for banker bailouts. Also keep in mind that while the cable discusses “systemic risk”, “bailouts” and “market turbulence”, none of these had happened yet. They were discussing what would soon happen in the future.

The discussion of “systemic risk”, “market turbulence” and “taxpayer bailouts” over a year before the markets actually collapsed and those events actually occurred, show they knew a global financial collapse. Not only did they know it would occur but knew what the consequences would be for the investors and the governments who were fleeced by Wall Street. As the cable reveals, Paulson chose to deal with the crisis by letting it continue and urging France to keep the issue underwaps  by  urging Sarkozy not  to “over react”, hence allowing the scandal to the continue which just postponed the inevitable.

Also remember when we were forced into these bailouts, it was  under the guise that our governments had no idea the banks were doing this and this was a sudden and unforeseeable crisis. Finally, remember that – while there have been plenty of accusations from “conspiracy theorists”,  “fringe economists” and “wing nut” politicians such as Ron Paul – there still has been no admission from our government that financial regulators or the ratings agencies played a role in the crisis.

…

[ALEXANDER HIGGINS]

But NOT Wall Street

Fair Game-

FOR the last three years we have been told repeatedly by government officials that funneling hundreds of billions of dollars to large and teetering banks during the credit crisis was necessary to save the financial system, and beneficial to Main Street.

But this has been a hard sell to an increasingly skeptical public. As Henry M. Paulson Jr., the former Treasury secretary, told the Financial Crisis Inquiry Commission back in May 2010, “I was never able to explain to the American people in a way in which they understood it why these rescues were for them and for their benefit, not for Wall Street.”

The American people were right to question Mr. Paulson’s pitch, as it turns out. And that became clearer than ever last week when Bloomberg News published fresh and disturbing details about the crisis-era bailouts.

[NEW YORK TIMES]

BusinessWeek-

When then-Treasury Secretary Henry Paulson initiated his Troubled Asset Relief Program (TARP) in September 2008, I assumed the objective was to restore trust in the market by identifying and weeding out the “troubled assets” held by the world’s financial institutions. Three weeks later, when I asked American friends why Paulson had switched strategies and was injecting hundreds of billions of dollars into struggling financial institutions, I was told that there were so many idiosyncratic types of paper scattered around the world that no one had any clear idea of how many there were, where they were, how to value them, or who was holding the risk. These securities had slipped outside the recorded memory systems and were no longer easy to connect to the assets from which they had originally been derived. Oh, and their notional value was somewhere between $600 trillion and $700 trillion dollars, 10 times the annual production of the entire world.

Former Treasury Secretary Henry Paulson

· While Paulson was CEO of Goldman Sachs, (May, 1999 – June, 2006) at the height of the boom, in 2006, Goldman  underwrote $76.5 billion in mortgage-backed securities, or 7% of the entire market. Of that $76.5 billion, $29.3 billion was subprime and another $29.8 billion was what’s called “Alt-A” paper. Alt-A mortgages are characterized, mainly, by lack of documentation and lack of equity: no income verification, no asset verification, little-to-no cash down. Thus, 38% of the mortgage-backed securities Goldman underwrote were subprime, and more than three-fourths of their securities were what is called “non-prime,” i.e., either subprime or Alt-A.

· The Paulson-era Goldman Sachs bonds have an average delinquency rate of almost 22% – higher than most of the other bonds. Many GSAMP (Goldman Sachs Alternative Mortgage Product) trusts have been cut to junk bond status and are selling at less than 47% of the original investment.

· Goldman set a Wall Street record for securities firm’s profits in 2007.

· Goldman’s biggest creditor was AIG (through financial guarantee insurance) so Goldman was a major beneficiary of the 2008 bailout of AIG.

· Goldman profited from the losses in its subprime portfolios by using derivatives to bet that the value of the mortgage securities would continue to fall. (Goldman says: “Less than 1% of bonds had this protection.'”)

· Paulson’s Compensation? Goldman paid a salary to Paulson of $38.5 million for 2005. Paulson also regularly received bonuses of over $10 million.

“While we regret that we participated in the market euphoria and failed to raise a responsible voice, we are proud of the way our firm managed the risk it assumed on behalf of our client before and during the financial crisis,” Lloyd Blankfein, CEO Goldman Sachs, Testifying Before Congress, June, 2010 (This quote is now called “the greatest non-apology of all times.”)

“Penalizing Wall Street for packaging mortgage loans is not the answer to the problem.” Henry Paulson, October 16, 2009, Georgetown University

“But it sure is a good place to start.”

Lynn Szymoniak, July 13, 2010, West Palm Beach, FL

Jonathan Stempel

NEW YORK (Reuters) – Lehman Brothers Holdings Inc (LEHMQ.PK) on Wednesday sued JPMorgan Chase & Co (JPM.N), accusing the second-largest U.S. bank of illegally siphoning billions of dollars of desperately-needed assets in the days leading up to its record bankruptcy.

Hot Stocks

The lawsuit filed in Manhattan bankruptcy court accused JPMorgan of using its “unparalleled access” to inside details of Lehman’s distress to extract $8.6 billion of collateral in the four business days ahead of Lehman’s September 15, 2008, bankruptcy, including $5 billion on the final business day.

JPMorgan was Lehman’s main “clearing” bank, in which it acts as a go-between in Lehman’s dealings with other parties.

According to the complaint, JPMorgan knew from this relationship that Lehman’s viability was fast weakening, and threatened to deprive Lehman of critical clearing services unless it posted an excessive amount of collateral.

“With this financial gun to Lehman’s head, JPMorgan was able to extract extraordinarily one-sided agreements from Lehman literally overnight,” the complaint said. “Those billions of dollars in collateral rightfully belong to the Lehman estate and its creditors.”

Lehman also said JPMorgan officials including Chief Executive Jamie Dimon decided to extract the collateral after learning from meetings with Federal Reserve Chairman Ben Bernanke and then-U.S. Treasury Secretary Henry Paulson that the government would not rescue Lehman from bankruptcy.

In the widely expected lawsuit, Lehman and its official committee of unsecured creditors are seeking $5 billion of damages, a return of the collateral and other remedies.

JPMorgan spokesman Joe Evangelisti called the lawsuit “meritless,” and said the bank will defend against it.

Any money recovered could increase the payout to creditors. Lehman has also sued Barclays Plc (BARC.L) to recover an $11.2 billion “windfall” from the takeover of U.S. assets.

In March, a bankruptcy judge approved an accord providing for JPMorgan to return several billion dollars of assets to Lehman’s estate, but giving Lehman a right to sue further.

Lehman collapsed after letting its balance sheet swell through exposure to commercial real estate, subprime mortgages and other risky sectors. With $639 billion of assets, Lehman was by far the largest U.S. company to go bankrupt.

EXAMINER REPORT

In his March report on Lehman’s bankruptcy, court-appointed examiner Anton Valukas said Lehman could raise a “colorable claim” against JPMorgan over the collateral demands.

He nevertheless said JPMorgan could raise “substantial defenses” under U.S. bankruptcy law.

Evangelisti contended that “as the examiner’s report makes clear, it was the ill-advised decisions of Lehman and its principals to take on perilous leverage and to double down on subprime mortgages and overpriced commercial real estate — and not conduct by our firm — that led to Lehman’s demise.”

Lehman, though, maintained that JPMorgan extracted the collateral to “catapult” itself ahead of other creditors.

“A century ago, John Pierpont Morgan used his position atop the world of finance to shore up a teetering firm and rescue the nation from the brink of financial collapse,” the complaint said, referring to the Panic of 1907.

“A century later, when the nation faced another epic financial crisis, Morgan’s namesake firm stripped a faltering Lehman Brothers of desperately needed cash,” it added.

The case is In re: Lehman Brothers Holdings Inc et al, U.S. Bankruptcy Court, Southern District of New York, No. 08-13555.

(Reporting by Jonathan Stempel; Additional reporting by Matthew Goldstein; Editing by Phil Berlowitz, Bernard Orr,Gary Hill)